SECURITIES REGULARIZATIONS IN NON-PROFIT ORGANIZATIONS
The ensuring of the fact that an organization is working as per regulations and is following the code of conduct, while keeping the interest of the public first, are matters which are becoming more and more complicated with the passage of time. Therefore, it can be said with some emphasis, that today one of the most basic issues of many organizations is the issue of Transparency.
Transparency has been defined as being "characterized by visibility of accessibility of information concerning business practices." [footnoteRef:1] More and more companies are now realizing that in the time and age in which we live, living with these models of ethics is compulsory, if they want to have credibility in the general public. [1: ]
In a study by Christopher Meyer and Julia Kirby, the change in the attitudes of the many corporations and sectors has been studied, and the conclusion reached by them, in their paper is, that the change in the Global scenario and how companies are interacting today, via internet and technological dependent instruments which has made the change surface. This was much evident in the way the tobacco companies dealt with the studies which blamed them for causing Lung Cancer -- by completely hiding or burying these studies -- and how the food and the restaurant industry reacted when it was discovered that trans fats was not a healthy option -- by revising their menus and conducting educational programs in this regard.[footnoteRef:2] [2: ]
Christopher and Julia attribute this change to three possible agents, "the growing scale of companies and their impacts, improvements in sensors that measure impacts and heightened sensibilities of stakeholders." [footnoteRef:3] [3: ]
There is no doubt that the stakeholder is the major actor in this regard and it is his/her interests which are directly affected when these ethical values are ignored for personal benefits. The law making agencies are realizing the implications of this sort of self-motivated interest and how they can affect the very trust that exists between corporations and the general populace.
The drafting and then the implementations of law have been the direct result of one of the biggest blow to American Economical Working back in 1929 when The Great Depression hit the American Society.[footnoteRef:4] [4: ]
This work however would focus on Non-Profit Organizations (NPO's) and how transparency is an important element of their working. This transparency becomes more important when Securities Elements, like Bonds, Notes, etc. are involved. Since NPO's are not meant for any profit, therefore the major contribution to their workforce is created by the voluntary actions of others. And to continue with this relationship of trust, it is important that steps are taken which ensure that no incident takes place which can alter this relationship in any way. Transparency is the only solution and the only key to attain this.
The concept of NPO's is pretty new and the understanding of how they function is still quite unknown to many. It therefore becomes of primary importance that first an understanding of NPO's is created before the paper can focus on the real issue of Security Regulation and their relationship with Non-Profit Organizations.
Before the main topic and the question which will be pondered in this paper can be presented it becomes essential to take a look, briefly only, about the financial workings of a Nonprofit Organizations and how they operate and work in a world which reality is a harsh pill to take.
2. WHAT ARE NONPROFIT ORGANIZATIONS?
Before the topic can proceed with establishing its point, it becomes important to take into consideration that how do we exactly define NPO's. The changing political and economic forces have made NPO's a very important and integral part of any economic setup and thus the very change in their internal setup and organization requires a deeper understanding. NPO's are becoming very complex organizations, varying "much in terms of mission, size, mode of operation and impact, particularly in a cross-national sense. Some are closer to the model of a government agency; others may indeed resemble the business firm; and yet others may be little more than an informal network." [footnoteRef:5] [5: ]
A Non-Profit Organization has been defined as,
"An organization that prohibits distributing any of its profits to individuals with control over the organization such as members, officers, directors, or trustees. While a nonprofit organization can make a profit, the profit it earns must be used toward the organization's activities. Thus, nonprofits operate for the common good and not individual wealth." [footnoteRef:6] [6: ]
But in the legal terminologies it should be eligible and in the jurisdiction of In order to be eligible "501(c)(3) corporation, meaning a nonprofit corporation that has received a determination letter from the Internal Revenue Service that it qualifies as an organization of the type described in Section 501(c)(3) of the Internal Revenue Code." [footnoteRef:7] [7: ]
There are many variations in the number of NPO's each being identified differently. "The designation "501(c) (3)" identifies the sections of the Internal Revenue Code (IRC) for one type of nonprofit." [footnoteRef:8] Under the IRC, there are a total of twenty-one categories of nonprofits, and are identified as 501(c) (1), (2), (3), and so on. The distinction is important as each one of them is different in their purpose and how they regulate the concerned NPO under its jurisdiction. These are important especially if the concerned organization wants to continue in maintaining its tax-exempted status. For the purpose of this paper, the majority of identification of NPO would be done as 501 (c) (3) as they are the only one of the NPO "to which contributions are tax-deductible." [footnoteRef:9] [8: ] [9: ]
The variations of NPO's include, Private Nonprofit Educational Organizations, under which comes, colleges and universities, auxiliary foundations, including for public college and universities, private elementary and high schools, charter schools, religiously affiliated schools, research institutions, centers, etc.; Cultural Organizations, which may include museums, libraries, aquariums, cultural venues, historical preservation, public broadcasting stations; Recreational Organizations, like local sports facilities, community centers, YMCAs; Charitable Organizations, which include, charities, foundations; Health Care Organizations, which include, hospitals, clinics, multilevel care, assisted living, congregate care; Multifamily Rental Housing, under which comes, low-income housing corporations, lessening the burden of government corporations; Other (Including Public-Private Partnerships), which include student housing, hotels, toll roads, cruise terminals, parking facilities, anything else that can help to "lessen the burden of government." [footnoteRef:10] [10: ]
In her writings, Anheier has categorized NPO's into four categories, Organized, Private, Non-profit-distributing, Self-governing and Voluntary,[footnoteRef:11] and all of them being increasingly different from each other in the nature and the way they are organized. [11: ]
Where once Voluntary work was considered to be the essence of NPO's today that perception is rapidly changing, and management is fast becoming a very important concept and no longer in odds with "voluntarism, philanthropy, compassion and a concern for the public good." [footnoteRef:12] The change has been due to the way NPO's are being perceived, which is as an economic force and Political Actors. [12: ]
Today the NPO sector is employing almost 5% of the total employment, and is expanding itself to more than just the concept of Charity, by being involved in Social Sciences, Philanthropy, etc. Their increased role and influence, today, requires them to be as organized and "corporate" in a sense of the word, which has become a need after years of evolution under relatively stable conditions.[footnoteRef:13] These figures represent almost one million 50(c) (3) nonprofit corporations[footnoteRef:14], working for different purposes and causes, ranging from animal cruelty to human rights. [13: ] [14: ]
But the changing economic conditions have meant that today much of the stability that NPO's had enjoyed for so long is slowly being taken away, as many Governments are now asking them to be less dependent on Government support, which can be cited as another reason for increased management demands.
Therefore what we see today is an environment of uncertainty which is quite new to NPO's and this situation, a turn towards more successful model, which in comparison is the corporate models, is being seen. Although, this management side in NPO's is seen to be more or less concentrated towards financial management which is very much unlike the corporate sectors, where the entire organization is being run in an organized manner.
It has been calculated that that NPO's have been dealing with annual revenues of over $25,000 and therefore maintaining transparency becomes an important element in this regard. IRS regularizations now make it compulsory for all NPO's to file an annual Form 990 and make the provision of the last three years of these filings accessible to the general public. The statistics show that the interest in these fillings is not at all a low key affair, as almost 700,000 registered users, 11 million searches were conducted in these regards, showing a remarkable show of interest. The details of these have been discussed in the following sections.